04 Jun Gartner Predicts 2022 Tech M&A Bonanza
At the beginning of 2020, everything pointed to a boom in tech M&A. Then the COVID-19 pandemic hit. The predicted catastrophes never occurred, and tech companies mostly remained well-positioned and thriving, especially those that offered remote services. But the pandemic did briefly slow down M&A—both because it made the practical realities more difficult, and because parties were hesitant to go through with deals during an uncertain and unprecedented economic time. We’ve seen a rebound in 2021, and Gartner is now predicting a bonanza in 2022.
The biggest impacts on acquisitions were during the second quarter of 2020, but by the fourth quarter, activity had already risen to two-year highs. Communications providers led the recovery, with software and services companies following closely behind. Private equity is increasingly interested in a wide range of technology providers, due in large part to the growth these companies promise and the stability they have shown throughout the pandemic.
Even in the midst of the pandemic, software providers were well positioned to thrive. They comprised over half of M&A acquisitions, and even higher activity is likely in the second half of 2021. In the second half of 2020, the largest growth in activity came from communication providers, most of whom were acquired by financial buyers. Service providers also figured prominently in the equation.
We continue to witness a high degree of consolidation—65% in services and 40% in software in the latter half of 2020. This trend points to the value of mergers for key competitors. If you can achieve the right synergies with a merger, it may yield greater power for both companies. We may also begin to see a change in how companies acquire one another—a shift from acquisitions toward partnerships.
Tech companies considering an acquisition this year—or hoping to strike it rich as the 2022 bonanza heats up—need to focus on stability for their customers. Successful acquirers continue to prioritize customer experience, brand identity, and company culture. Acquisitions must preserve the experiences customers value, reduce frustration, and keep customers front and center. If you can reduce service disruptions and maintain transparent communications, your merger is much better positioned to succeed.
Ultimately, no business can survive without dedicated customers. Keeping them on board during a change requires a lot of empathy and willingness to understand their needs. The right tech M&A advisory team can help you remain focused on your customers while managing the deal. Don’t go it alone.